Shopify Inc (SHOP: NYE) witnessed its stock drop by a huge 10% in the fourth quarter of 2023, even though it had a great quarter with 24% more sales than the previous quarter and non-GAAP EPS of $0.34. What could have made this connection go bad?
Key Highlights of Shopify’s Q4 Report:
Below are the key points from Shopify’s Q4 reports:
- Revenue surge: Sales climbed 24% year-over-year to $2.14 billion, beating analyst expectations by a significant $60 million.
- Profitable quarter: Non-GAAP earnings per share (EPS) reached $0.34, exceeding the forecasted $0.31.
- Future outlook: Shopify projected low 20% revenue growth for Q1 2024, adjusting for the sale of its Deliverr logistics business.
Stock Target Advisor’s Take on Shopify:
Stock Target Advisor issued a ‘Sell’ rating on Shopify. The analyst target price over the next 12 months is set at USD 72.00, a substantial decline from the last closing price of USD 77.18.
The positive signals such as low debt, high market capitalization and superior revenue growth were overshadowed by the negative signals: heightened price compared to the book value and earnings, high volatility, and negative cash flow along with free cash flow coupled with low earnings growth.
Despite its recent market stumble, a total of 31 covering analysts gave Shopify a ‘Buy’ rating with an average target price of 72. However, market trends within the sector showed an average 1-month return of 0.71% and 1-week return of -1.44%.
Conclusion:
Shopify’s long-term prospects are bright despite the market’s initial reaction. The company has a strong platform, a growing user base, and a strong e-commerce presence. However, managing investor expectations and demonstrating good growth will help the stock recover.
